Welcome to EV's point and figures. This blog is dedicated to the use of point and figure charts in technical analysis.

Although P&F first appeared in charts in the 1930's, it is an often overlooked techique for analysing stocks and charts. A poor relation compared to line and bar charts and their range of momentum indicators. Yet few charts provide a clearer picture of the daily battle between bulls and bears for market control.

Like most methods, it should not be used in isolation. It should form part of an analysts 'tool box' and be used with other techniques to help form an overall view.

The charts that appear on this blog and any accompanying comments are purely for information purposes only - my own personal take on where the prices may be heading. They do not constitute investment advice.

Tuesday, August 24, 2010

It's starting to look grim for the Nikkei, which closed today at a 15 month low of 8,995. The 50x3 (end of day) chart shows a clear breakdown in previous support, a decisive double bottom sell signal and a new activated downside target of 8,300. I don't have any obvious upside targets at this time and would suggest risk is firmly to the downside.

The 100x3 closing chart shows a similar picture. It can be seen that the market had support previously at 9,100 but this has now broken down. It would be better to see some follow through here, as at 9,000 we are only one box below this 9,100 level and could creep back above it. That said, the 50x3 chart above suggests otherwise. The long term bearish resistance line is firmly in place with a shorter term resistance lines overhead.

Thursday, August 19, 2010

FTSE closed today at 5,211.29, a fall of 91.5 points. Big turnaround today, we have a three box (75 point) reversal and a lower column of 0's than the previous column of 0's. So the downside target of 4,950 (mentioned two days ago) is now active. We shall see!

Tuesday, August 17, 2010

25 points on the FTSE lend themselves to quite 'noisy' charts but we had a solid 75 point reversal during the day, the FTSE closed at 5,350 and we therefore have a new column of X's, which I have inserted myself (dodgy looking column of 4 blue X's)!

We need some sort of resolution here. It can be seen that there is a shorter term bullish support line but looming overhead are two (red) short term bearish resistance lines. If the FTSE can push on through these and get up to the 5,450 level, we could have a push on to 5,750, which would give something akin to the double topping pattern we had in Q3 2007.

The column of six 0's which has just been reversed by today's up move has created an unactivated downside price objective of 4,950 which I have not placed on the chart. For it to become active, the bears will need to take control, reversing this up column of X's in to a new column of 0's and moving the index back below a closing level of 5,225, one box below the previous low of 5,250 made by the last column of 0's.

A difficult one to call at present because the battle between bulls and bears remains intense but this should be resolved soon.

Monday, August 16, 2010

An interesting turn around in the fortunes of the Hang Seng, with the bulls (for now least) running with the ball. Up until very recently, this chart was showing clear evidence of distribution as bears took control, pushing the index to lower lows with each down column of 0's. But in May/June, the 19,000 box provided support and tempted buyers back in to the market. We saw a 3 box (750 point) reversal and a new column of X's take the index back up to 20,750. At this point, the bears moved in and a 750 point move created a new column of three 0's but this has since reversed in to a column of X's and a 1,750 point move higher in the index.

We have an an activated upside target of 24,250. To the downside, the target of 14,750 remains active but will fall away if the index can push onwards above 22,250. If the market does continue upwards, expect some resistance at 22,750, the level where the market last reached in the bullish move upwards prior to reversing.

Contrast the P&F above with the normal bar chart below. Some gaps to be filled below and a possible re-test of the 50 day moving average? Recent action though has been higher highs and higher lows.

This is a 25x 3 closing chart on the Nasdaq. Since peaking in the 2,525 box, the index has fallen back and we have an activated downside target of 1,775 in play. It can be seen that since the peak the bears have had success in pushing the market lower. As bulls have come back in, there has been clear resistance at the 2,300 level. On three occasions in recent weeks that level has been reached, only for bears to come back in and push the market lower And on two of those occasions so far, the market has made a lower low before reversing back up. It remains to be seen if this current column of 0's will continue this trend, ie fill the 2,075 box.

To the upside we have an unactivated target of 2,700. For this to become activated, we need to see the current column of 0's reverse (25x3) 75 points and a new up column of X's move through the resistance at 2,300, filling the 2,325 box. It's quite possible but the bulls will need to regroup and punch through this stubborn resistance. Note too this (red) minor bearish resitance line, just skulking above that level.